Which savings mechanism pairs with a high-deductible plan to give individuals tax-advantaged funds for medical expenses?

• A. Health Reimbursement Arrangement (HRA)
• B. Health Insurance Marketplace
• C. Health Savings Account (HSA)
• D. Flexible Spending Account (FSA)

Answer: (C)

Pairing a high-deductible plan with an HSA lets individuals set aside money specifically for medical costs with favorable taxes. An HSA is designed to work with HDHPs: you contribute funds (typically on a pre-tax basis or tax-deductible), the money grows tax-free, and withdrawals are tax-free when used for qualified medical expenses. The funds stay in the account year after year and are owned by you, so they aren’t tied to a job and can roll over indefinitely. This triple tax advantage—tax-deductible contributions, tax-free growth, and tax-free withdrawals for eligible medical costs—makes the combination the best match for an HDHP.

Other options don’t fit as well: a Health Insurance Marketplace is where you purchase coverage, not a savings vehicle; a Flexible Spending Account is often tied to a non-HDHP and may have use-it-or-lose-it rules; a Health Reimbursement Arrangement is typically employer-funded and less portable, with funds that aren’t owned by you.